Japanese Yen remains steady despite modest US Dollar weakness

157.00–158.00 remains the range for USD/JPY. The pair has yet to establish a clear direction.

Tokyo remains committed to supporting the Yen, Finance Minister Katayama reaffirmed on Monday.

Ahead of Tuesday's US midterm elections, the US Dollar stays under pressure as investors await the vote.

157.00 remains the focus for USD/JPY within its recent trading ranges. Despite modest US Dollar (USD) weakness on Monday, the Japanese Yen (JPY) has failed to capitalise and remains directionless as markets prepare for the US midterm elections. Uncertainty over the next interest rate increase persists after the Bank of Japan (BoJ) held monetary policy steady on Friday and raised doubts over the timing of a hike.

Tokyo stands ready to act against disorderly currency moves, Japanese Finance Minister Satsuki Katayama reaffirmed earlier on Monday. She also highlighted the agreement with the US to curb excessive JPY weakness. Her remarks have offered little support to the Yen.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

A modest fall in the JPY followed Friday's Bank of Japan policy decision and Governor Ueda's press release. As widely anticipated, the BoJ held its benchmark interest rates at 1.25%. However, Ueda made further increases conditional on developments in FX, IA and the Middle East conflict. That stance raised questions over a December hike and reduced speculative support for the JPY.

US Dollar Loses Momentum on Softer Fed Signals and Political Uncertainty

Softer Fed policy signals and mounting political uncertainty are jointly weakening the US Dollar's recent momentum, according to analysts at MUFG. In a note, MUFG says: “A damaging defeat for the Republicans could put a dampener on US dollar strength, but we don’t expect it to be a game changer on its own,” while also cautioning that it “would limit room for further fiscal stimulus and could increase market attention on the potential for less market-friendly policies beyond the current Presidency.”

Market developments have also reduced the US Dollar's appeal. MUFG notes that “the Fed’s policy update was less hawkish than expected, and AI-related US equities came under renewed selling pressure,” and highlights that “the 2-year US Treasury yield has fallen by almost 40bps from the high at the end of September,”. Looking ahead, the analysts state that “market participants will be watching closely this week’s Quarterly Refunding Announcement from the US Treasury,” with potential implications for the Dollar and broader interest rate expectations.

US midterm elections: key questions

US midterms: which offices are contested?

Halfway through a president's four-year term, the US holds federal elections known as the midterms. All 435 House of Representatives seats and about one-third of Senate seats are contested. In many states, voters also elect governors and other state and local officials.

2026 midterm elections: what is the polling date?

Tuesday, 3 November 2026 is Election Day. Under federal law, the vote takes place on the Tuesday following November's first Monday. Many states have already begun early and postal voting.

US midterms: what is at stake?

Control of both chambers of Congress for the final two years of President Donald Trump's term is determined by these elections. The party holding a majority sets legislative priorities and appoints committee leaders. In the Senate, it also controls the confirmation of judges and senior officials.

2026 midterms: is the presidency being contested?

No presidential vote takes place in the midterms. Presidential elections occur every four years, with the next scheduled for November 2028. The midterms are widely viewed as a verdict on the incumbent president's party, which has historically tended to lose seats in the House.

2026 midterms: potential implications for the US dollar

A limited, temporary US Dollar response is what most analysts anticipate, rather than a sustained trend. Markets have partly priced in a divided Congress, widely regarded as the base case. The election results could have a more pronounced effect on Treasury yields. Results that strengthen expectations of fiscal stimulus generally support yields and the US Dollar; a legislative impasse that restrains fresh spending can depress both. Disputes over funding or the debt ceiling can also generate a brief safe-haven boost for the Dollar. Across a six-to-twelve-month horizon, economic growth and Federal Reserve policy carry more weight than the election outcome.

Midterm elections: the historical pattern for stocks

Historically, US equities have tended to struggle ahead of midterm elections before strengthening afterwards. Since 1950, the S&P 500 has recorded a gain 12 months after each midterm vote: 19 out of 19, averaging about 15%. Analysts attribute this pattern to the resolution of uncertainty after the results. Past performance does not guarantee future returns, and some strategists caution that elevated valuations in 2026 could challenge that record.

Divided Congress: market benefits and risks

A divided government has often appealed to markets, as legislative deadlock reduces the prospect of major tax, spending and regulatory changes. With a Republican president in office, the S&P 500 has historically performed well in the years after midterm elections that divide control of Congress. However, funding deadlines, debt-ceiling disputes and congressional investigations remain sources of potential short-term volatility.